Senators balk at cutting taxes to spur job growth

Senate Republicans Monday expressed numerous reservations about a bill that proposes tax cuts and incentives to entice jobs to Arizona, dimming the prospects of House Speaker Kirk Adams' key legislation.

Amid concerns about what the tax cuts would do to the state deficit, as well as provisions that some felt favored new business at the expense of existing Arizona companies, the senators declined to move House Bill 2250 along. Instead, they said they need to work on further changes and bring it back to their GOP caucus for more discussion.

The action, or inaction, this late in the legislative session signals trouble for the bill, which has stalled in the Senate for three months after winning quick passage in the House in January.

Adams, R-Mesa, said he wants to spur job creation by offering businesses tax cuts and tax incentives to locate in Arizona.

But Senate President Bob Burns, R-Peoria, has worried that the tax cuts would reduce revenue to state coffers at the very time that the state is trying to erase a structural deficit.

Last week, Gov. Jan Brewer's office circulated her "Arizona Jobs" proposal, which envisioned a much-slimmer package of tax cuts than Adams'. Brewer's proposal would cost the state $47.5 million in tax cuts by fiscal 2017 - a far cry from the $942 million that Adams originally envisioned for the same time period, and still lower than the $538 million in tax cuts that was in a revised bill.

On Monday, Burns said budget analysts estimate the state will be grappling with deficits for the next three years. If the tax cuts in the current version of HB 2250 were in place, he said, the state would need to see revenue growth of up to 24 percent a year to cover the projected deficit. That is an unrealistic growth rate, he added.

"I think we need to advance very carefully on this," Burns told senators as they met in their Republican caucus. "This is a bill with a potential tremendous impact."

Senators generally agreed, although they differed in which elements of the bill they believed should be retained.

Some favored across-the-board tax cuts that they said would benefit every business, whether existing or prospective. Others noted that cutting the personal-property tax rate on businesses would push up taxes on residential property owners, a politically difficult move.

Burns said he, Adams and Brewer need to meet and find common ground before the bill can advance. He is scheduled to meet with Adams today.